Matchmaking is based entirely on Trophies.
Level and experience don’t matter. Town Hall level doesn’t matter (in terms of finding a match). Period. I took this screenshot a while back when I had about 600 Trophies. I was also level 40 or so as you can see from my large Army. Think TheDominator stands much of a chance?
Why is this a problem? Because each player can intentionally gain or lose Trophies as they desire, essentially giving them control over how hard they want their opponents to be. This means that a level 7 TH can come and ruin your day if they feel like it, just because they ditched some Trophies and ended up at the same Trophy count as you.
The recent patch (2.111, “Winter Update”) made it so you can only find matches who are worth 15-35 trophies if you three star them (note that this is not the same as “within 35 Trophies of you”). This restricts you to a rather small group of players that are currently similar Trophy counts as you.